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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
MCKESSON CORPORATION
SPIRIT ACQUISITION CORPORATION
AND
D&K HEALTHCARE RESOURCES, INC.
DATED AS OF JULY 8, 2005
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS............................................................................................
2
SECTION 1.01
Definitions......................................................................................
2
ARTICLE II THE
OFFER.............................................................................................
12
SECTION 2.01 The
Offer........................................................................................
12
SECTION 2.02 Company
Action...................................................................................
16
SECTION 2.03
Directors........................................................................................
18
ARTICLE III THE
MERGER...........................................................................................
20
SECTION 3.01 The
Merger.......................................................................................
20
SECTION 3.02 Effective Time;
Closing..........................................................................
20
SECTION 3.03 Effect of the
Merger.............................................................................
21
SECTION 3.04 Certificate of
Incorporation;
By-laws............................................................
21
SECTION 3.05 Directors and
Officers...........................................................................
22
SECTION 3.06 Conversion of
Securities.........................................................................
22
SECTION 3.07 Employee Stock
Options...........................................................................
23
SECTION 3.08 Dissenting
Shares................................................................................
24
SECTION 3.09 Surrender of
Shares; Stock Transfer
Books........................................................
25
SECTION 3.10 Subsequent
Actions...............................................................................
27
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE
COMPANY.........................................................
27
SECTION 4.01 Organization
and Qualification;
Subsidiaries.....................................................
28
SECTION 4.02 Certificate of
Incorporation and
By-laws.........................................................
28
SECTION 4.03
Capitalization...................................................................................
29
SECTION 4.04 Authority
Relative to This
Agreement.............................................................
30
SECTION 4.05 No Conflict;
Required Filings and
Consents.......................................................
31
SECTION 4.06 Permits;
Compliance..............................................................................
33
SECTION 4.07 SEC Filings;
Financial
Statements................................................................
34
SECTION 4.08 Absence of
Certain Changes or
Events.............................................................
37
SECTION 4.09 Absence of
Litigation............................................................................
38
SECTION 4.10 Employee
Benefit
Plans...........................................................................
39
SECTION 4.11 Labor and Employment
Matters.....................................................................
43
SECTION 4.12 Offer
Documents; Schedule 14D-9; Proxy
Statement.................................................
45
SECTION 4.13 Property and
Leases..............................................................................
46
SECTION 4.14
Taxes............................................................................................
48
SECTION 4.15 Environmental
Matters............................................................................
51
SECTION 4.16 Action with
Respect to Rights
Agreement..........................................................
53
SECTION 4.17 Material
Contracts...............................................................................
53
SECTION 4.18
Insurance........................................................................................
58
SECTION 4.19
Brokers..........................................................................................
59
SECTION 4.20 Intellectual
Property............................................................................
59
SECTION 4.21 Accounting or
Audit
Irregularities...............................................................
63
SECTION 4.22 Accounts
Receivable..............................................................................
64
SECTION 4.23
Inventory........................................................................................
64
SECTION 4.24 Healthcare
Regulatory and FDA
Compliance.........................................................
65
SECTION 4.25 Secondary
Markets................................................................................
67
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SECTION 4.26
Customers........................................................................................
68
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND
PURCHASER.................................................
69
SECTION 5.01 Corporate
Organization...........................................................................
69
SECTION 5.02 Authority
Relative to This
Agreement.............................................................
69
SECTION 5.03 No Conflict;
Required Filings and
Consents.......................................................
70
SECTION 5.04
Financing........................................................................................
71
SECTION 5.05 Offer
Documents; Proxy
Statement.................................................................
71
SECTION 5.06
Brokers..........................................................................................
72
SECTION 5.07 Absence of
Litigation............................................................................
72
SECTION 5.08 Company
Stock....................................................................................
73
ARTICLE VI CONDUCT OF BUSINESS PENDING THE
MERGER................................................................
73
SECTION 6.01 Conduct of
Business by the Company Pending the
Merger............................................
73
ARTICLE VII ADDITIONAL
AGREEMENTS................................................................................
77
SECTION 7.01 Stockholders'
Meeting............................................................................
77
SECTION 7.02 Proxy
Statement..................................................................................
78
SECTION 7.03 Access to
Information;
Confidentiality...........................................................
79
SECTION 7.04 No Solicitation
of
Transactions..................................................................
79
SECTION 7.05 Employee
Benefits
Matters........................................................................
84
SECTION 7.06 Directors' and
Officers' Indemnification and
Insurance...........................................
85
SECTION 7.07 Notification of
Certain
Matters..................................................................
89
SECTION 7.08 Further Action;
Reasonable
Efforts...............................................................
89
SECTION 7.09 Public
Announcements.............................................................................
90
ARTICLE VIII CONDITIONS TO THE
MERGER............................................................................
90
SECTION 8.01 Conditions to
the
Merger.........................................................................
90
ARTICLE IX TERMINATION, AMENDMENT AND
WAIVER.....................................................................
91
SECTION 9.01
Termination......................................................................................
91
SECTION 9.02 Effect of
Termination............................................................................
94
SECTION 9.03 Fees and
Expenses................................................................................
94
SECTION 9.04
Amendment........................................................................................
95
SECTION 9.05
Waiver...........................................................................................
96
ARTICLE X GENERAL
PROVISIONS.....................................................................................
96
SECTION 10.01 Nonsurvival of
Representations and
Warranties...................................................
96
SECTION 10.02
Notices.........................................................................................
96
SECTION 10.03
Severability....................................................................................
98
SECTION 10.04 Entire
Agreement;
Assignment....................................................................
98
SECTION 10.05 Parties in
Interest.............................................................................
98
SECTION 10.06 Specific
Performance............................................................................
99
SECTION 10.07 Governing
Law...................................................................................
99
SECTION 10.08 Waiver of Jury
Trial............................................................................
100
SECTION 10.09
Headings........................................................................................
100
SECTION 10.10
Counterparts....................................................................................
100
Annex A Conditions to the
Offer...............................................................................
A-1
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ii
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AGREEMENT
AND PLAN OF MERGER, dated as of July 8, 2005 (this
"Agreement"),
among McKesson Corporation, a Delaware
corporation ("Parent"), Spirit
Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and D&K
Healthcare Resources, Inc., a Delaware corporation
(the "Company").
WHEREAS,
the Boards of Directors of Parent, Purchaser and the Company
have
each determined that it is in the best
interests of their respective
stockholders for Parent to acquire the
Company upon the terms and subject to the
conditions set forth herein;
WHEREAS,
in furtherance of such acquisition, it is proposed that
Purchaser
shall make a cash tender offer (the
"Offer") to acquire all the shares of common
stock, par value $0.01 per share, of the
Company, together with the associated
Rights (as defined herein) (collectively,
"Shares") that are issued and
outstanding for $14.50 per Share (such
amount, or any greater amount per Share
paid pursuant to the Offer, being the "Per
Share Amount"), net to the seller in
cash, upon the terms and subject to the
conditions of this Agreement and the
Offer;
WHEREAS,
the Board of Directors of the Company (the "Board") has
approved
the making of the Offer and resolved to
recommend that holders of Shares tender
their Shares pursuant to the Offer;
WHEREAS,
as a condition and inducement to Parent to enter into this
Agreement and incur the obligations set
forth herein, concurrently with the
execution and delivery of this Agreement,
certain of the directors and executive
officers of the Company have entered into a
Stockholder Support Agreement
pursuant to which each such person has
agreed to tender the Shares held by such
person in the Offer;
WHEREAS,
also in furtherance of such acquisition, the Boards of
Directors
of Parent, Purchaser and the Company have
each approved this Agreement and
declared its advisability and
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approved the merger (the "Merger") of
Purchaser with and into the Company in
accordance with the General Corporation Law
of the State of Delaware ("Delaware
Law"), following the consummation of the
Offer and upon the terms and subject to
the conditions set forth herein and
WHEREAS,
approval by the Board of the Offer and the Merger constituted
the
approval required by Section 203(a)(1) of
Delaware Law.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants
and agreements herein contained, and
intending to be legally bound hereby,
Parent, Purchaser and the Company hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION
1.01 Definitions.
(a) For purposes of this Agreement:
"80% Items" means those s.k.u.'s of pharmaceutical products
which,
individually, have the highest carrying
values as would be reflected on a
consolidated balance sheet of the Company
and the Subsidiaries dated as of the
date of Parent's physical inspection of the
inventory provided for under Clause
(m) of Annex A and which, in the aggregate,
account for not less than eighty
percent (80%) of the carrying value of the
pharmaceutical inventories of the
Company and the Subsidiaries, taken as a
whole.
"Acquisition Proposal" means (i) any proposal or offer from any
person relating to any direct or indirect
acquisition of (A) all or a
substantial part of the assets of the
Company or of any Subsidiary or (B) over
fifteen percent (15%) of any class of
equity securities of the Company or of any
Subsidiary; (ii) any tender offer or
exchange offer, as defined pursuant to the
Exchange Act, that, if consummated, would
result in any person beneficially
owning fifteen percent (15%) or more of any
class of equity securities of the
Company or any Subsidiary; or
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(iii) any merger, consolidation, business
combination, sale of all or a
substantial part of the assets,
recapitalization, liquidation, dissolution or
similar transaction involving the Company
or any Subsidiary, other than the
Transactions.
"Adjusted Service Level" means the quotient of lines filled
plus
"manufacturers cannot supply" lines divided
by lines ordered. For purposes of
this definition, lines for which fifty
percent (50%) or fewer of the items
ordered are shipped shall be deemed not
filled, provided that lines for which a
customer is placed on allocation because
the customer's orders substantially
exceed the customer's customary orders of
such line items shall be deemed
filled.
"affiliate" of a specified person means a person who, directly
or
indirectly through one or more
intermediaries, controls, is controlled by, or is
under common control with, such specified
person.
"beneficial owner", with respect to any Shares, means a person
who
shall be deemed to be the beneficial owner
of such Shares (i) which such person
or any of its affiliates or associates (as
such term is defined in Rule 12b-2
promulgated under the Exchange Act)
beneficially owns, directly or indirectly,
(ii) which such person or any of its
affiliates or associates has, directly or
indirectly, (A) the right to acquire
(whether such right is exercisable
immediately or subject to the passage of
time or other conditions) pursuant to
any agreement, arrangement or understanding
or upon the exercise of conversion
rights, exchange rights, warrants or
options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement
or understanding or (iii) which are
beneficially owned, directly or indirectly,
by any other persons with whom such
person or any of its affiliates or
associates or person with whom such person or
any of its affiliates or associates has any
agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any
Shares.
3
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"Business Day" means any day, other than a Saturday, Sunday, or
a
Federal holiday, and shall consist of the
time period from 12:01 a.m. through
12:00 midnight Eastern Standard Time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property Rights" means any Intellectual
Property Rights: purported to be owned by
the Company or any Subsidiary.
"Company Registered Intellectual Property Rights" means
Registered
Intellectual Property Rights within the
Company Intellectual Property Rights.
"Company Systems" shall mean all computer, hardware, software,
systems, and equipment (including embedded
microcontrollers in non-computer
equipment) embedded within or required to
operate the current products of the
Company and the Subsidiaries, and/or
material to or necessary for the Company
and the Subsidiaries to carry on their
businesses as currently conducted.
"Computer Software" means all computer programs (whether in
source
code or object code form and including,
without limitation, any and all software
implementations of algorithms, models and
methodologies), and all data bases,
compilations and documentation (including,
without limitation, user, operator,
and training manuals) related to the
foregoing.
"Contract" means any note, bond, mortgage, indenture, contract,
agreement, lease license, permit, franchise
or other obligation or instrument,
whether or not in writing.
"control" (including the terms "controlled by" and "under
common
control with") means the possession,
directly or indirectly, or as trustee or
executor, of the power to direct or cause
the direction of the management and
policies of a person, whether through the
ownership of voting securities, as
trustee or executor, by contract or credit
arrangement or otherwise.
4
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"Documentation" means a document or documents containing
information
recording each distribution of any given
Drug, from sale by a pharmaceutical
manufacturer, through acquisition and sale
by any wholesale distributor or
repackager, until final sale to a pharmacy
or other person administering or
dispensing the Drug. The information
required to be included in a Drug's
Documentation must at least detail the
amount of the Drug, its dosage form and
strength, its lot numbers, the name and
address of each owner of the Drug and
his or her signature, its shipping
information, including the name and address
of each person certifying delivery or
receipt of the Drug, and a certification
that the recipient has authenticated the
Documentation. It must also include the
name, address, telephone number and, if
available, email contact information of
each wholesale distributor involved in the
chain of custody of the Drug.
"Drug" means any drug (including, but not limited to, finished
dosage forms or active ingredients) that is
subject to, defined by, or described
by Section 503(b) of the Federal Food, Drug
and Cosmetic Act.
"Environmental Laws" means any foreign, federal, state, or
local
laws, regulations, ordinances, requirements
of any Governmental Authorities and
common law relating to (i) releases or
threatened releases of Hazardous
Substances or materials containing
Hazardous Substances; (ii) the manufacture,
handling, transport, use, treatment,
storage or disposal of, and exposure to,
Hazardous Substances or materials
containing Hazardous Substances; or (iii)
pollution or protection of the environment,
health, safety or natural resources.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the
Company or any Subsidiary that,
together with the Company or
5
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any Subsidiary, is treated as a single
employer within the meaning of Section
414(b), (c), (m) or (o) of the Code.
"Firm" means an independent accounting firm of national
reputation
selected by Parent and the Company or, if
Parent and the Company are unable,
within two (2) Business Days after the
Company's notice to Parent of a Dispute,
to select the "Firm", then an independent
accounting firm of national reputation
selected by the primary auditing firms of
the Company and Parent.
"Hazardous Substances" means (i) those substances defined in or
regulated under the following United States
federal statutes and their state
counterparts, as each may be amended from
time to time, and all regulations
thereunder: the Hazardous Materials
Transportation Act, the Resource
Conservation and Recovery Act, the
Comprehensive Environmental Response,
Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (ii) petroleum
and petroleum products, including
crude oil and any fractions thereof; (iii)
natural gas, synthetic gas, and any
mixtures thereof; (iv) polychlorinated
biphenyls, asbestos, radon, mold and
fungus; (v) any other contaminant; and (vi)
any substance, material or waste
regulated by any Governmental Authority
pursuant to any Environmental Law.
"HIPAA" means the Health Insurance Portability and
Accountability
Act of 1996, Pub. L. No. 104-191, as
amended, and all rules and regulations
promulgated thereunder.
"Identified Customers" means the two customers of the Company
identified in Section 1.1(a) of the
Disclosure Schedule.
"Intellectual Property Rights" means any or all legal rights
in,
arising out of or associated with any
patents, trade secrets, copyrights,
trademarks or domain names.
6
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"knowledge" means the actual knowledge after due and diligent
inquiry (and what such person should have
known after due and diligent inquiry)
of the Chairman of the Board and Chief
Executive Officer, the President and
Chief Operating Officer, the Senior Vice
President and Chief Financial Officer,
the Senior Vice President Sales and
Business Development, the Vice President,
General Counsel and Secretary, the Vice
President and Controller, the Vice
President Purchasing, the Director of
Compliance and the Senior Vice President
Operations and Chief Information Technology
Officer of the Company
(collectively, the "Knowledge Group");
provided, however, that due and diligent
inquiry shall not require any member of the
Knowledge Group to make inquiry of
any person who is not a member of the
Knowledge Group.
"License Agreements" means all material written agreements
between
the Company or any Subsidiary, and third
parties, other than those which have
expired or been terminated for reasons
unrelated to breach, and in which: (i)
such third party has licensed or granted to
the Company or any Subsidiary any
right to use, exploit, practice, sell or
distribute any of such third party's
Intellectual Property Rights or Technology
("Inbound License Agreements"); or
(ii) the Company or any Subsidiary (x) has
granted to such third party any right
to use, exploit, practice, sell or
distribute any Company Intellectual Property
Rights or Technology, or (y) has agreed to
any restriction on the right of
Company or any Subsidiary (as the case may
be) to use or enforce any Company
Intellectual Property Rights or any
Technology owned by the Company or any
subsidiary ((x) and/or (y), "Outbound
License Agreements").
"Material Adverse Effect" means, when used in connection with
the
Company or any Subsidiary, any event,
circumstance, change or effect that is or
is reasonably likely to be materially
adverse to the business, operations,
condition (financial or otherwise) or
results of operations of the Company and
the Subsidiaries, taken as a whole; except,
in each case, for any
7
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such event, circumstance, change or effect
resulting from (i) the loss by the
Company and/or its Subsidiaries of either
or both of the Identified Customers as
a result of the Company's failure to obtain
consents under the change of control
provisions contained in such customers'
contracts with the Company, (ii) any
seasonal reduction in the revenues or
earnings of the Company that is of a
magnitude consistent with prior periods,
(iii) changes in United States
economic, financial market, political or
regulatory conditions generally, (iv)
changes in the wholesale drug distribution
industry (the "Industry"), which do
not disproportionately affect the Company
as compared to others in the Industry
in any material respect, (v) the loss by
the Company and/or the Subsidiaries of
any customers or employees primarily as a
result of (A) any public announcement
by Parent or the Company (which, in the
case of the Company, is made in
accordance with the requirements of this
Agreement, the Offer, the Merger or the
other transactions contemplated by this
Agreement) or (B) any public
announcement by Parent of its intentions
with respect to the future conduct of
the business of the Company and the
Subsidiaries after consummation of the Offer
and the Merger, provided that, in case
either (A) or (B) above applies, (1)
there has been no loss by the Company
and/or the Subsidiaries of any customers
or employees primarily as a result of (x)
misfeasance or malfeasance by the
Company, the Subsidiaries or any of their
respective officers, directors or
employees, (y) pricing action by the
Company and/or any Subsidiary
disproportionate to general industry
pricing or (z) the Company and the
Subsidiaries having an Adjusted Service
Level of ninety-two percent (92%) or
less and (2) such loss or losses in the
case of this proviso, individually or in
the aggregate, would reasonably be expected
to materially and adversely affect
the business, operations, condition
financial or otherwise or results of
operations of the Company and its
Subsidiaries, taken as a whole, (vi) any
actions taken, or failures to take action,
or such other effects, changes or
8
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occurrences to which Parent has separately
consented in writing or (vii)
terrorist activities, war or armed
hostilities if the effect thereof would
reasonably be expected to be
transitory.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company,
syndicate, person (including, without
limitation, a "person" as defined in
Section 13(d)(3) of the Exchange Act),
trust, association or entity or government,
political subdivision, agency or
instrumentality of a government.
"Registered Intellectual Property Rights" shall mean Internet
domain
name registrations and any legal rights in,
arising out of or associated with
any applications (including written
invention disclosures that have not yet been
filed) for, or registrations or issuances
or grants of, any Intellectual
Property Rights before or by any
governmental authority responsible for issuing
or registering any of the Intellectual
Property Rights, other than those which
have been formally abandoned or formally
allowed to lapse by the Company in the
ordinary course of business in accordance
with the exercise of reasonable
business judgment.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person
means an affiliate controlled by such
person, directly or indirectly, through one
or more intermediaries.
"Superior Proposal" means a bona fide, written Acquisition
Proposal
which the Board determines in good faith,
after consultation with its financial
and legal advisors, taking into account all
legal, financial, regulatory and
other aspects of the proposal and the
person making the proposal (including any
break-up fees, expense reimbursement
provisions and conditions to consummation),
(i) is more favorable to the stockholders
of the Company (in their capacities as
stockholders) from a financial point of
view than the Transactions (including
any adjustment to the terms and conditions
proposed by Parent in response to
such proposal) and (ii)
9
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is fully financed or reasonably capable of
being fully financed, reasonably
likely to receive all required governmental
approvals on a timely basis and
otherwise reasonably likely of being
completed on the terms proposed on a timely
basis; provided that, for purposes of this
definition of "Superior Proposal,"
the term Acquisition Proposal shall have
the meaning assigned to such term in
this Section 1.01 except that any reference
to "over fifteen percent (15%) of
any class of equity securities" or "fifteen
percent (15%) or more of any class
of equity securities" in the definition of
"Acquisition Proposal" shall be
deemed to be a reference to "a majority of
the equity securities" and
"Acquisition Proposal" shall only be deemed
to refer to a transaction involving
the Company.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies,
duties,
tariffs, imposts and other charges of any
kind (together with any and all
interest, penalties, additions to tax and
additional amounts imposed with
respect thereto) imposed by any
Governmental Authority, including, without
limitation: with respect to income,
franchise, windfall or other profits, gross
receipts, property, sales, use, capital
stock, payroll, employment, social
security, workers' compensation,
unemployment compensation or net worth; taxes
or other charges in the nature of excise,
withholding, ad valorem, stamp,
transfer, value-added or gains taxes;
license, registration and documentation
fees; and customs duties, tariffs and
similar charges.
"Tax Returns" shall mean all returns, information returns,
estimates, reports and other documents
relating to Taxes filed or required to be
filed with any Governmental Authority.
"Technology" means all processes, apparatuses, systems,
formulae,
algorithms, data, models, plans,
methodologies, theories, ideas, techniques,
discoveries, disclosures, inventions,
Computer Software, information or
know-how, and other technological subject
matter.
10
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(b) The following terms have the meaning set forth in the
Sections
set forth below:
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Defined Term
Location of Definition
------------
----------------------
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Action
4.09
Agreement
Preamble
Board
Recitals
Certificate of Merger
3.02
Certificates
3.09(b)
Company
Preamble
Company Preferred Stock
4.03
Company Stock Option
3.07
Company Stock Plans
3.07
Confidentiality Agreement
7.03(b)
Completion Date
Paragraph (l) of Annex A
Delaware Law
Recitals
Disclosure Schedule
Introduction to Article IV
Dispute
Paragraph (l) of Annex A
Dispute Resolution Period
Paragraph (l) of Annex A
Dissenting Shares
3.08(a)
Effective Time
3.02
Environmental Permits
4.15
ERISA
4.10(a)
Exchange Act
2.01(a)
FDA
4.24.(h)
Fee
9.03(a)
GAAP
4.07(b)
Governmental Authority
4.05(b)
Governmental Entity
4.05(b)
HSR Act
2.01(a)
Indemnified Parties
7.06(a)
Insurance Amount
7.06(b)
IRS
4.10(a)
Law
4.05(a)
Liens
4.13(b)
Material Contracts
4.17(b)
Merger
Recitals
Merger Consideration
2.01(a)
Minimum Condition
2.01(a)
Multiemployer Plan
4.10(b)
Multiple Employer Plan
4.10(b)
Nasdaq
4.05(b)
Non-Material Computer Software 4.20(b)
Offer
Recitals
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11
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Defined Term
Location of Definition
------------
----------------------
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<C>
Offer Documents
2.01(b)
Offer to Purchase
2.01(b)
Original Directors
2.03
Outlook
4.07(f)
Parent
Preamble
Paying Agent
3.09(a)
Permits
4.06
Permitted Liens
4.13(b)
Per Share Amount
Recitals
Plans
4.10(a)
Proxy Statement
4.12
Purchaser
Preamble
Rights
4.03
Rights Agreement
4.03
Schedule 14D-9
2.02(b)
Schedule TO
2.01(b)
SEC
2.01(a)
SEC Reports
4.07(a)
Securities Act
4.07(a)
Shares
Recitals
SOX Act
4.07(a)
Stockholders' Meeting
7.01(a)
Subsidiary
4.01(a)
Surviving Corporation
3.03
Tax Claim
4.14
Transactions
2.02(a)
2004 Balance Sheet
4.07(c)
WARN Act
4.11(e)
</TABLE>
ARTICLE II
THE OFFER
SECTION
2.01 The Offer.
(a) Provided that this Agreement shall not have been terminated
in
accordance with Section 9.01 and that none
of the events set forth in Annex A
hereto shall have occurred and be
continuing, Purchaser shall commence the Offer
as promptly as reasonably practicable (and
in any event within ten Business
Days) after the date hereof. The obligation
of Purchaser to accept for payment
Shares tendered pursuant to the Offer shall
be subject to the condition (the
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"Minimum Condition") that at least the
number of Shares that shall constitute a
majority of the then outstanding Shares on
an as-if-converted basis (including,
without limitation, all Shares issuable
upon the conversion of any convertible
securities or upon the exercise of any
options, warrants or rights (other than
the Rights)) shall have been validly
tendered and not withdrawn prior to the
expiration of the Offer and also shall be
subject to the satisfaction of each of
the other conditions set forth in Annex A
hereto. Purchaser expressly reserves
the right (i) to waive any such condition,
(ii) to increase the price per Share
payable in the Offer and (iii) to make any
other changes in the terms of the
Offer; provided, however, that in the case
of clause (iii) no other change may
be made which (w) decreases the Per Share
Amount payable in the Offer, (x)
reduces the maximum number of Shares to be
purchased in the Offer, (y) imposes
conditions to the Offer in addition to
those set forth in Annex A hereto or (z)
is otherwise disadvantageous to the
stockholders of the Company. Subject to the
prior satisfaction or waiver by Parent or
Purchaser of the Minimum Condition and
the other conditions of the Offer set forth
in Annex A hereto, Purchaser shall
consummate the Offer in accordance with its
terms and accept for payment and pay
for all Shares tendered pursuant to the
Offer as soon as practicable after
Purchaser is legally permitted to do so
under applicable law. Notwithstanding
the foregoing, Purchaser may, without the
consent of the Company, (i) extend the
Offer beyond the scheduled expiration date,
which shall be 20 Business Days
following the commencement of the Offer,
if, at the scheduled expiration of the
Offer, any of the conditions to Purchaser's
obligation to accept for payment
Shares, shall not be satisfied or waived,
or (ii) extend the Offer for any
period required by any rule, regulation or
interpretation of the Securities and
Exchange Commission (the "SEC"), or the
staff thereof, applicable to the Offer.
In addition, if, on the initial scheduled
expiration date and each subsequent
scheduled expiration date of the Offer, the
sole condition or
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conditions remaining unsatisfied are the
failure of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR
Act"), to have expired or been terminated
and/or, if there is a Dispute that is
pending or continuing, the Dispute
Resolution Period shall not have expired ,
then Purchaser shall extend the Offer from
time to time until the fifth Business
Day after the later to occur of (i)
expiration or termination of the applicable
waiting period under the HSR Act or (ii)
the expiration of the Dispute
Resolution Period. Purchaser may, in its
sole discretion, provide a "subsequent
offering period" in accordance with Rule
14d-11 under the Securities Exchange
Act of 1934, as amended (the "Exchange
Act"). Purchaser shall not terminate the
Offer prior to any scheduled expiration
date (as the same may be extended or
required to be extended) without the
written consent of the Company except in
the event that Purchaser terminates this
Agreement pursuant to Section 9.01. The
Per Share Amount shall, subject to
applicable withholding of taxes, be net to
the seller in cash, upon the terms and
subject to the conditions of the Offer.
Purchaser shall pay for all Shares validly
tendered and not withdrawn promptly
following the acceptance of Shares for
payment pursuant to the Offer.
Notwithstanding the immediately preceding
sentence and subject to the applicable
rules of the SEC and the terms and
conditions of the Offer, Purchaser expressly
reserves the right to delay payment for
Shares in order to comply in whole or in
part with applicable laws. Any such delay
shall be effected in compliance with
Rule 14e-l(c) under the Exchange Act. If
the payment equal to the Per Share
Amount in cash (the "Merger Consideration")
is to be made to a person other than
the person in whose name the surrendered
certificate formerly evidencing Shares
is registered on the stock transfer books
of the Company, it shall be a
condition of payment that the certificate
so surrendered shall be endorsed
properly or otherwise be in proper form for
transfer and that the person
requesting such payment shall have paid all
transfer and
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other taxes required by reason of the
payment of the Merger Consideration to a
person other than the registered holder of
the certificate surrendered, or shall
have established to the satisfaction of
Purchaser that such taxes either have
been paid or are not applicable.
(b) As promptly as reasonably practicable on the date of
commencement of the Offer, Purchaser shall
file with the SEC a Tender Offer
Statement on Schedule TO (together with all
amendments and supplements thereto,
the "Schedule TO") with respect to the
Offer. The Schedule TO shall contain or
shall incorporate by reference an offer to
purchase (the "Offer to Purchase")
and forms of the related letter of
transmittal and any related summary
advertisement (the Schedule TO, the Offer
to Purchase and such other documents,
together with all supplements and
amendments thereto, being referred to herein
collectively as the "Offer Documents").
Parent, Purchaser and the Company agree
to correct promptly any information
provided by any of them for use in the Offer
Documents that shall have become false or
misleading and to correct any material
omissions, and Parent and Purchaser further
agree to take all steps necessary to
cause the Schedule TO, as so corrected, to
be filed with the SEC, and the other
Offer Documents, as so corrected, to be
disseminated to holders of Shares, in
each case as and to the extent required by
applicable federal securities laws.
The Company and its counsel shall be given
a reasonable opportunity to review
the Offer Documents before they are filed
with the SEC, and Parent and Purchaser
shall give due consideration to all the
reasonable additions, deletions or
changes suggested thereto by the Company
and its counsel. In addition, Parent
and Purchaser agree to provide the Company
and its counsel with any comments,
whether written or oral, that Parent,
Purchaser or their counsel may receive
from time to time from the SEC or its staff
with respect to the Offer Documents
promptly after Parent's or Purchaser's, as
the case may be, receipt of such
comments, and any written or oral responses
thereto. The Company and its
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counsel shall be given a reasonable
opportunity to review any such written
responses and Parent and Purchaser shall
give due consideration to all
reasonable additions, deletions or changes
suggested thereto by the Company and
its counsel. If the Offer is terminated or
withdrawn by Purchaser, or this
Agreement is terminated prior to the
purchase of Shares in the Offer, Parent and
Purchaser shall promptly return, and shall
cause any depository or paying agent,
including the Paying Agent (as hereinafter
defined), acting on behalf of Parent
and Purchaser, to return all tendered
Shares to the registered holders thereof.
SECTION
2.02 Company Action.
(a) The Company hereby approves of and consents to the Offer
and
represents that (i) the Board, at a meeting
duly called and held on July 8,
2005, has unanimously (A) determined that
this Agreement and the transactions
contemplated hereby, including each of the
Offer and the Merger (collectively,
the "Transactions") are fair to, and in the
best interests of, the holders of
Shares, (B) approved, adopted and declared
advisable this Agreement and the
Transactions (such approval and adoption
having been made in accordance with
Delaware Law) and (C) resolved to recommend
that the holders of Shares accept
the Offer and tender Shares pursuant to the
Offer, and approve and adopt this
Agreement and the Transactions, and (ii)
Citigroup Global Markets, Inc. has
delivered to the Board an opinion, which
will be confirmed promptly in writing,
that the $14.50 per Share dollar amount to
be received by the holders of Shares
pursuant to each of the Offer and the
Merger is fair to the holders of Shares
from a financial point of view. The Company
hereby consents to the inclusion in
the Offer Documents of the recommendation
of the Board described in the
immediately preceding sentence, and the
Company shall not withdraw or modify
such recommendation in any manner adverse
to Purchaser or Parent except as
provided in Section 7.04(c). The Company
has been
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advised by its directors and executive
officers that they intend either to
tender all Shares beneficially owned by
them to Purchaser pursuant to the Offer
or to vote such Shares in favor of the
approval and adoption by the stockholders
of the Company of this Agreement and the
Transactions.
(b) As promptly as reasonably practicable on the date of
commencement of the Offer, the Company
shall file with the SEC a
Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all
amendments and supplements thereto, the
"Schedule 14D-9") containing, except as
provided in Section 7.04(c), the
recommendation of the Board described in
Section 2.02(a), and shall disseminate the
Schedule 14D-9 to the extent required
by Rule 14d-9 promulgated under the
Exchange Act and any other applicable
federal securities laws. The Company,
Parent and Purchaser agree to correct
promptly any information provided by any of
them for use in the Schedule 14D-9
which shall have become false or misleading
and to correct any material
omissions, and the Company further agrees
to take all steps necessary to cause
the Schedule 14D-9, as so corrected, to be
filed with the SEC and disseminated
to holders of Shares, in each case as and
to the extent required by applicable
federal securities laws. Parent, Purchaser
and their counsel shall be given a
reasonable opportunity to review the
Schedule 14D-9 before it is filed with the
SEC and the Company shall give due
consideration to all reasonable additions,
deletions or changes suggested thereto by
Parent, Purchaser and their counsel.
In addition, the Company agrees to provide
Parent, Purchaser and their counsel
with any comments, whether written or oral,
that the Company or its counsel may
receive from time to time from the SEC or
its staff with respect to the Schedule
14D-9 promptly after the Company's receipt
of such comments, and any written or
oral responses thereto. Parent, Purchaser
and their counsel shall be given a
reasonable opportunity to review any such
written responses and the Company
shall
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<PAGE>
give due consideration to all reasonable
additions, deletions or changes
suggested thereto by Parent, Purchaser and
their counsel.
(c) The Company shall promptly furnish Parent or Purchaser with
mailing labels containing the names and
addresses of all record holders of
Shares and with security position listings
of Shares held in stock depositories,
each as of a recent date, together with all
other available listings and
computer files containing names, addresses
and security position listings of
record holders and beneficial owners of
Shares. The Company shall promptly
furnish Purchaser with such additional
information, including, without
limitation, updated listings and computer
files of stockholders, mailing labels
and security position listings, and such
other assistance in disseminating the
Offer Documents to holders of Shares as
Parent or Purchaser may reasonably
request. Subject to the requirements of
applicable law, and except for such
steps as are necessary to disseminate the
Offer Documents and any other
documents necessary to consummate the Offer
or the Merger, Parent and Purchaser
shall hold in confidence the information
contained in such labels, listings and
files, shall use such information only in
connection with the Transactions, and,
if this Agreement shall be terminated in
accordance with Section 9.01, shall
deliver to the Company all copies of such
information then in their possession.
SECTION
2.03 Directors.Promptly upon the purchase of and payment for
any
Shares by Parent or Purchaser pursuant to
the Offer (provided the Shares so
purchased represent at least a majority of
the Shares issued and outstanding),
Parent shall be entitled to designate such
number of directors, rounded to the
nearest whole number, on the Board as is
equal to the product of the total
number of directors on the Board (giving
effect to the directors designated by
Parent pursuant to this sentence)
multiplied by the percentage that the number
of Shares so
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<PAGE>
accepted for payment bears to the total
number of Shares then outstanding. In
furtherance of Parent's rights under this
Section 2.03, the Company shall, upon
Parent or Purchaser's request, use all
reasonable efforts promptly either to
increase the size of the Board or to secure
the resignations of such number of
its incumbent directors, or both, as is
necessary to enable Parent's designees
to be so elected to the Board, and shall
take all actions available to the
Company to cause Parent's designees to be
so elected. At such time, the Company
shall also cause persons designated by
Parent to have appropriate representation
on (i) each committee of the Board, (ii)
each board of directors (or similar
body) of each Subsidiary and (iii) each
committee (or similar body) of each such
board. The Company shall promptly take all
actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to
fulfill its obligations under this Section
2.03, including mailing to
stockholders (as part of the Schedule 14D-9
or otherwise) the information
required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's
designees to be elected to the Board
(provided that Purchaser shall have
provided to the Company on a timely basis
all information required to be
included with respect to Purchaser's
designees). In the event that Parent's
designees are elected to the Board, until
the Effective Time (as defined below),
the Board shall have at least three
directors who are directors on the date of
this Agreement (the "Original Directors");
provided that, in such event, if the
number of Original Directors is reduced
below three for any reason whatsoever,
any remaining Original Directors (or
Original Director, if there be only one
remaining) shall be entitled to designate
persons to fill such vacancies who
shall be deemed to be Original Directors
for purposes of this Agreement or, if
no Original Director then remains, the
other directors shall designate three
persons to fill such vacancies who shall
not be stockholders, affiliates or
associates of Parent or Purchaser, and such
persons shall be deemed to be
Original Directors for
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<PAGE>
purposes of this Agreement. Notwithstanding
anything in this Agreement to the
contrary, if Parent's designees are elected
to the Board before the Effective
Time, the affirmative vote of a majority of
the Original Directors shall be
required for the Company to (a) amend or
terminate this Agreement or agree or
consent to any amendment or termination of
this Agreement, (b) exercise or waive
any of the Company's rights, benefits or
remedies hereunder, (c) extend the time
for performance of Parent's and Purchaser's
respective obligations under this
Agreement, (d) take any other action by the
Board under or in connection with
this Agreement, (e) amend the Certificate
of Incorporation or Bylaws of the
Company or (f) approve any other action by
the Company which could adversely
affect the interests of the stockholders of
the Company (other than Parent,
Purchaser and their affiliates (other than
the Company and its Subsidiaries)),
with respect to the Transactions.
ARTICLE III
THE MERGER
SECTION
3.01 The Merger.Upon the terms and subject to the conditions
set
forth in Article VIII, and in accordance
with Delaware Law, Purchaser shall be
merged with and into the Company.
SECTION
3.02 Effective Time; Closing.As promptly as practicable after
the
satisfaction or, if permissible, waiver of
the conditions set forth in Article
VIII, the parties hereto shall cause the
Merger to be consummated by filing this
Agreement or a certificate of merger or
certificate of ownership and merger with
the Secretary of State of the State of
Delaware (the "Certificate of Merger"),
in such form as is required by, and
executed in accordance with, the relevant
provisions of Delaware Law (the date and
time of such filing being the
"Effective Time"). Prior to such filing, a
closing shall be held at the offices
of Skadden, Arps, Slate, Meagher & Flom
LLP, Four Embarcadero Center, San
Francisco, CA 94111, or such other
place
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<PAGE>
as the parties shall agree, for the purpose
of confirming the satisfaction or
waiver, as the case may be, of the
conditions set forth in Article VIII.
SECTION
3.03 Effect of the Merger.As a result of the Merger, the
separate
corporate existence of Purchaser shall
cease and the Company shall continue as
the surviving corporation of the Merger
(the "Surviving Corporation"). At the
Effective Time, the effect of the Merger
shall be as provided in the applicable
provisions of Delaware Law. Without
limiting the generality of the foregoing,
and subject thereto, at the Effective Time,
all the property, rights,
privileges, powers and franchises of the
Company and Purchaser shall vest in the
Surviving Corporation, and all debts,
liabilities, obligations, restrictions,
disabilities and duties of the Company and
Purchaser shall become the debts,
liabilities, obligations, restrictions,
disabilities and duties of the Surviving
Corporation.
SECTION
3.04 Certificate of Incorporation; By-laws.
(a) At the Effective Time, subject to Sections 7.06(b) and (c),
the
Certificate of Incorporation of Purchaser,
as in effect immediately prior to the
Effective Time, shall be the Certificate of
Incorporation of the Surviving
Corporation until thereafter amended as
provided by law and such Certificate of
Incorporation; provided, however, that, at
the Effective Time, Article I of the
Certificate of Incorporation of the
Surviving Corporation shall be amended to
read as follows: "The name of the
corporation is D&K Healthcare Resources, Inc."
(b) Unless otherwise determined by Parent prior to the
Effective
Time, and subject to Sections 7.06(b) and
(c), the By-laws of Purchaser, as in
effect immediately prior to the Effective
Time, shall be the By-laws of the
Surviving Corporation until thereafter
amended as provided by law, the
Certificate of Incorporation of the
Surviving Corporation and such By-laws.
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<PAGE>
SECTION
3.05 Directors and Officers.The directors of Purchaser
immediately
prior to the Effective Time shall be the
initial directors of the Surviving
Corporation, each to hold office in
accordance with the Certificate of
Incorporation and By-laws of the Surviving
Corporation, and the officers of the
Company immediately prior to the Effective
Time shall be the initial officers of
the Surviving Corporation, in each case
until their respective successors are
duly elected or appointed and qualified or
until their earlier death,
resignation or removal.
SECTION
3.06 Conversion of Securities.At the Effective Time, by virtue
of
the Merger and without any action on the
part of Purchaser, the Company or the
holders of any of the following
securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be
canceled pursuant to Section 3.06(b)
and any Dissenting Shares (as hereinafter
defined), but including restricted
Shares (whether vested or unvested) issued
under Company Stock Plans (defined
below)) shall be canceled and shall be
converted automatically into the right to
receive an amount equal to the Merger
Consideration payable, without interest,
to the holder of such Share, upon
surrender, in the manner provided in Section
3.09, of the certificate that formerly
evidenced such Share;
(b) Each Share held in the treasury of the Company and each
Share
owned by Purchaser, Parent or any direct or
indirect wholly owned subsidiary of
Parent or of the Company immediately prior
to the Effective Time shall be
canceled without any conversion thereof and
no payment or distribution shall be
made with respect thereto; and
(c) Each share of common stock, par value $0.001 per share, of
Purchaser issued and outstanding
immediately prior to the Effective Time shall
be converted into and
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<PAGE>
exchanged for one validly issued, fully
paid and nonassessable share of common
stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION
3.07 Employee Stock Options.Effective as of the Effective Time,
the Company shall (i) terminate the
Company's Amended and Restated 2001 Long
Term Incentive Plan, its 1992 Long Term
Incentive Plan and its 1993 Stock Option
Plan, each as amended through the date of
this Agreement (the "Company Stock
Plans"), and (ii) cancel, at the Effective
Time, each outstanding option to
purchase shares of Company Common Stock
granted under the Company Stock Plans or
otherwise (each, a "Company Stock Option")
that is outstanding and unexercised
as of such date. Each holder of a Company
Stock Option that is outstanding and
unexercised at the Effective Time (whether
or not such option has vested) shall
be entitled to receive from the Surviving
Corporation immediately after the
Effective Time, in exchange for the
cancellation of such Company Stock Option,
an amount in cash equal to the excess, if
any, of (x) the Per Share Amount over
(y) the per share exercise price of such
Company Stock Option, multiplied by the
number of shares of Company Common Stock
subject to such Company Stock Option as
of the Effective Time. Any such payment
shall be subject to all applicable
federal, state and local tax withholding
requirements. To the extent that
amounts are so withheld by Parent,
Purchaser, the Surviving Corporation or the
Paying Agent, such amounts shall be treated
for all purposes of this Agreement
as having been paid to the holder of Shares
in respect of which such deduction
and withholding was made by Parent,
Purchaser, the Surviving Corporation or the
Paying Agent. The Company shall take all
necessary action to approve the
disposition of the Company Stock Options in
connection with the Transactions to
the extent necessary to exempt such
dispositions and acquisitions under Rule
l6b-3 of the Exchange Act,
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and shall take all necessary action to
effect the treatment of the Company Stock
Plans and Company Stock Options set forth
in this Section 3.07, including
obtaining all necessary consents.
SECTION
3.08 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary,
Shares that are outstanding immediately
prior to the Effective Time and that are
held by stockholders who shall have neither
voted in favor of the Merger nor
consented thereto in writing and who shall
have demanded properly in writing
appraisal for such Shares in accordance
with Section 262 of Delaware Law
(collectively, the "Dissenting Shares")
shall not be converted into, or
represent the right to receive, the Merger
Consideration. Such stockholders
shall be entitled to receive payment of the
appraised value of such Shares held
by them in accordance with the provisions
of such Section 262, except that all
Dissenting Shares held by stockholders who
shall have failed to perfect or who
effectively shall have withdrawn or lost
their rights to appraisal of such
Shares under such Section 262 shall
thereupon be deemed to have been converted
into, and to have become exchangeable for,
as of the Effective Time, the right
to receive the Merger Consideration,
without any interest thereon, upon
surrender, in the manner provided in
Section 3.09, of the certificate or
certificates that formerly evidenced such
Shares.
(b) The Company shall give Parent (i) prompt notice of any
demands
for appraisal received by the Company,
withdrawals of such demands, and any
other instruments served pursuant to
Delaware Law and received by the Company
relating to rights of appraisal and (ii)
the opportunity to direct all
negotiations and proceedings with respect
to demands for appraisal under
Delaware Law. The Company shall not, except
with the prior written consent of
Parent, make any payment with respect to
any demands for appraisal or offer to
settle or settle any such demands.
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<PAGE>
SECTION
3.09 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate a bank
or
trust company to act as agent (the "Paying
Agent") for the holders of Shares to
receive the funds to which holders of
Shares shall become entitled pursuant to
Section 3.06(a). For purposes of
determining the amount of Merger Consideration
to be so deposited, Parent and Purchaser
shall assume that no stockholder of the
Company will perfect any right to appraisal
of his, her or its Shares. Such
funds shall be invested by the Paying Agent
as directed by Parent or the
Surviving Corporation, in its sole
discretion, pending payment thereof by the
Paying Agent to the holders of the Shares.
Earnings from such investments shall
be the sole and exclusive property of
Parent and the Surviving Corporation, and
no part of such earnings shall accrue to
the benefit of holders of Shares.
(b) Promptly after the Effective Time, the Surviving
Corporation
shall cause to be mailed to each person who
was, at the Effective Time, a holder
of record of Shares entitled to receive the
Merger Consideration pursuant to
Section 3.06(a) a form of letter of
transmittal (which shall specify that
delivery shall be effected, and risk of
loss and title to the certificates
evidencing such Shares (the "Certificates")
shall pass, only upon proper
delivery of the Certificates to the Paying
Agent) and instructions for use in
effecting the surrender of the Certificates
pursuant to such letter of
transmittal. Upon surrender to the Paying
Agent of a Certificate, together with
such letter of transmittal, duly completed
and validly executed in accordance
with the instructions thereto, and such
other documents as may be required
pursuant to such instructions, the holder
of such Certificate shall be entitled
to receive in exchange therefor the Merger
Consideration for each Share formerly
evidenced by such Certificate, and such
Certificate shall then be canceled. No
interest shall accrue or be paid on the
Merger
25
<PAGE>
Consideration payable upon the surrender of
any Certificate for the benefit of
the holder of such Certificate. If the
payment equal to the Merger Consideration
is to be made to a person other than the
person in whose name the surrendered
certificate formerly evidencing Shares is
registered on the stock transfer books
of the Company, it shall be a condition of
payment that the certificate so
surrendered shall be endorsed properly or
otherwise be in proper form for
transfer and that the person requesting
such payment shall have paid all
transfer and other taxes required by reason
of the payment of the Merger
Consideration to a person other than the
registered holder of the certificate
surrendered, or shall have established to
the satisfaction of Purchaser that
such taxes either have been paid or are not
applicable.
(c) At any time following the sixth month after the Effective
Time,
the Surviving Corporation shall be entitled
to require the Paying Agent to
deliver to it any funds which had been made
available to the Paying Agent and
not disbursed to holders of Shares
(including, without limitation, all interest
and other income received by the Paying
Agent in respect of all funds made
available to it), and, thereafter, such
holders shall be entitled to look to the
Surviving Corporation (subject to abandoned
property, escheat and other similar
laws) only as general creditors thereof
with respect to any Merger Consideration
that may be payable upon due surrender of
the Certificates held by them.
Notwithstanding the foregoing, neither the
Surviving Corporation nor the Paying
Agent shall be liable to any holder of a
Share for any Merger Consideration
delivered in respect of such Share to a
public official pursuant to any
abandoned property, escheat or other
similar law.
(d) At the close of business on the day of the Effective Time,
the
stock transfer books of the Company shall
be closed and thereafter there shall
be no further registration of transfers of
Shares on the records of the Company.
From and after the Effective Time, the
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<PAGE>
holders of Shares outstanding immediately
prior to the Effective Time shall
cease to have any rights with respect to
such Shares except as otherwise
provided herein or by applicable law.
SECTION
3.10 Subsequent Actions.If at any time after the Effective Time
the Surviving Corporation shall determine,
in its sole discretion, or shall be
advised, that any deeds, bills of sale,
assignments, assurances or any other
actions or things are necessary or
desirable to vest, perfect or confirm of
record or otherwise in the Surviving
Corporation its right, title or interest
in, to or under any of the rights,
properties or assets of either of the Company
or Purchaser acquired or to be acquired by
the Surviving Corporation as a result
of, or in connection with, the Merger or
otherwise to carry out this Agreement,
then the officers and directors of the
Surviving Corporation shall be authorized
to execute and deliver, in the name and on
behalf of either the Company or
Purchaser, all such deeds, bills of sale,
instruments of conveyance, assignments
and assurances and to take and do, in the
name and on behalf of each of such
corporations or otherwise, all such other
actions and things as may be necessary
or desirable to vest, perfect or confirm
any and all right, title or interest
in, to and under such rights, properties or
assets in the Surviving Corporation
or otherwise to carry out this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as
set forth in the Company's disclosure schedule delivered to
Parent prior to the execution of this
Agreement (the "Disclosure Schedule"), the
Company represents and warrants to Parent
and Purchaser as set forth below. Each
disclosure set forth in the Disclosure
Schedule is identified by reference to,
or has been grouped under a heading
referring to, a specific individual section
of this Agreement and disclosure made
pursuant to any section thereof shall be
deemed to be disclosed on each of the other
sections of the Disclosure Schedule
to the extent the
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applicability of the disclosure to such
other section is reasonably apparent on
its face from the disclosure made.
SECTION
4.01 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each subsidiary of the Company
("Subsidiary") is a corporation duly
organized, validly existing and, to the
extent applicable, in good standing under
the laws of the jurisdiction of its
incorporation and has the requisite
corporate power and authority and all
necessary governmental approvals to own,
lease and operate its properties and to
carry on its business as it is now being
conducted. The Company and each
Subsidiary is duly qualified or licensed as
a foreign corporation to do
business, and is in good standing, in each
jurisdiction where the character of
the properties owned, leased or operated by
it or the nature of its business
makes such qualification or licensing
necessary, except where the failure to
have such good standing, individually or in
the aggregate, would not reasonably
be expected to have a Material Adverse
Effect. Section 4.01(a) of the Disclosure
Schedule lists jurisdictions in which the
Company and each Subsidiary is
qualified as a foreign corporation.
(b) Except as disclosed in Section 4.01(b) of the Disclosure
Schedule, the Company does not directly or
indirectly own any equity or similar
interest in, or any interest convertible
into or exchangeable or exercisable for
any equity or similar interest in, any
corporation, partnership, joint venture
or other business association or
entity.
SECTION
4.02 Certificate of Incorporation and By-laws.The Company has
heretofore furnished to Parent a complete
and correct copy of the Certificate of
Incorporation and the By-laws or equivalent
organizational documents, each as
amended to date, of the Company and each
Subsidiary. Such Certificate of
Incorporation, By-laws or equivalent
organizational documents are in full force
and effect. Neither the Company nor any
Subsidiary is in violation of
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any of the provisions of its Certificate of
Incorporation, By-laws or equivalent
organizational documents.
SECTION
4.03 Capitalization.The authorized capital stock of the Company
consists of 25,000,000 Shares and 1,000,000
shares of preferred stock, no par
value ("Company Preferred Stock"). As of
the date hereof, (a) 14,260,856 Shares
are issued and outstanding, all of which
are duly authorized, validly issued,
fully paid and nonassessable, (b) 1,249,300
Shares are held in the treasury of
the Company, (c) no Shares are held by any
Subsidiary or affiliate of the
Company, (d) 49,230 Shares are reserved for
future issuance pursuant to employee
stock options, restricted stock or any
stock or stock-related incentive rights
to be granted pursuant to the Company Stock
Plans, (e) 1,510,666 Shares are
issuable upon the exercise of existing
options to purchase Shares, and (f)
297,970 Shares are subject to outstanding
restricted stock agreements. As of the
date hereof, no shares of Company Preferred
Stock are issued and outstanding.
Except as set forth in this Section 4.03
and Section 4.03 of the Disclosure
Schedule, and except for the rights (the
"Rights") issued pursuant to the Rights
Agreement, dated as of November 12, 1998
(the "Rights Agreement"), between the
Company and Harris Trust and Savings Bank,
as rights agent, there are no
options, warrants or other rights,
agreements, arrangements or commitments of
any character relating to the issued or
unissued capital stock of the Company or
any Subsidiary or obligating the Company or
any Subsidiary to issue or sell any
shares of capital stock of, or other equity
interests in, or any other security
exercisable or exchangeable for, or
convertible into, any such shares or other
equity interests in, the Company or any
Subsidiary. All Shares subject to
issuance as aforesaid, upon issuance on the
terms and conditions specified in
the instruments pursuant to which they are
issuable, will be, when issued, duly
authorized, validly issued, fully paid and
nonassessable. There are no
outstanding contractual obligations,
29
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arrangements or commitments of any
character of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any
Shares, any other capital stock of,
or other equity interest in the Company or
any Subsidiary or to provide funds
to, or make any investment (in the form of
a loan, capital contribution or
otherwise) in, any Subsidiary or any other
person. There are no bonds,
debentures, notes or other indebtedness of
the Company or any Subsidiary having
the right to vote (or convertible into, or
exchangeable for, securities having
the right to vote) on any matters on which
stockholders of the Company or any
Subsidiary may vote. Each outstanding share
of capital stock of each Subsidiary
is duly authorized, validly issued, fully
paid and nonassessable, and all such
shares are owned by the Company or another
Subsidiary free and clear of all
security interests, liens, claims, pledges,
options, rights of first refusal,
agreements, limitations on the Company's or
any Subsidiary's voting rights,
charges and other encumbrances of any
nature whatsoever.
SECTION
4.04 Authority Relative to This Agreement.The Company has all
necessary corporate power and authority to
execute and deliver this Agreement,
to perform its obligations hereunder and to
consummate the Transactions. The
execution and delivery of this Agreement by
the Company and the consummation by
the Company of the Transactions have been
duly and validly authorized by all
necessary corporate action, and no other
corporate proceedings on the part of
the Company are necessary to authorize this
Agreement or to consummate the
Transactions (other than, with respect to
the Merger, the approval and adoption
of this Agreement by the holders of a
majority of the then-outstanding Shares,
if and to the extent required by applicable
law, and the filing and recordation
of appropriate merger documents as required
by Delaware Law). This Agreement has
been duly executed and delivered by the
Company and, assuming the due
authorization, execution and delivery by
Parent and Purchaser,
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<PAGE>
constitutes a legal, valid and binding
obligation of the Company, enforceable
against the Company in accordance with its
terms, except that (i) such
enforcement may be subject to applicable
bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting
creditors' rights generally and (ii)
the remedy of specific performance and
injunctive and other forms of equitable
relief may be subject to equitable defenses
and to the discretion of the court
before which any proceeding therefor may be
brought. Assuming the accuracy of
the representation and warranty set forth
in Section 5.08, the action taken by
the Board in approving this Agreement and
the Transactions is sufficient to
render inapplicable to this Agreement and
the Transactions the restrictions on
business combinations contained in Section
203 of the Delaware Law.
SECTION
4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company
do
not, and the performance of this Agreement
by the Company will not, (i) conflict
with or violate the Certificate of
Incorporation or By-laws or equivalent
organizational documents of the Company or
any Subsidiary, (ii) assuming all
consents, approvals, authorizations and
other actions described in Section
4.05(b) have been obtained or taken,
conflict with or violate any federal,
state, local or foreign statute, law,
ordinance, regulation, rule, agency
requirement, code, executive order,
injunction, judgment, decree, arbitral award
or other order ("Law") applicable to the
Company or any Subsidiary or by which
any property or asset of the Company or any
Subsidiary is bound or affected, or
(iii) result in any breach of or constitute
a default (or an event which, with
notice or lapse of time or both, would
become a default) under, or give to
others any right of termination, amendment,
acceleration or cancellation of, or
result in the creation of a lien or other
encumbrance on any property or asset
of the Company or any Subsidiary pursuant
to,
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<PAGE>
any note, bond, mortgage, indenture,
contract, agreement, lease, license,
permit, franchise or other instrument or
obligation, except, with respect to
clauses (ii) and (iii), (1) as set forth in
Section 4.05 of the Disclosure
Schedule and (2) for any such conflicts,
violations, breaches, defaults or other
occurrences which, individually or in the
aggregate, would not reasonably be
expected to prevent or materially delay
consummation of the Offer or the Merger
or otherwise would not reasonably be
expected to prevent or materially delay the
Company from performing its obligations
under this Agreement and would not
reasonably be expected to have a Material
Adverse Effect.
(b) The execution and delivery of this Agreement by the Company
do
not, and the performance of this Agreement
by the Company will not, require any
consent, approval, authorization or permit
of, or filing with or notification
to, any United States federal, state,
county, foreign or local governmental,
regulatory or administrative authority,
agency, instrumentality or commission (a
"Governmental Entity") or any court,
tribunal, or judicial or arbitral body
(together with a Governmental Entity, a
"Governmental Authority"), except for
(i) compliance with any applicable
requirements of the Exchange Act, (ii) any
filings as may be required under Delaware
Law in connection with the Merger,
(iii) filings permits, authorizations,
consents and approvals as may be required
under the HSR Act, (iv) the filing with the
SEC and the Nasdaq National Market,
Inc. ("Nasdaq") of (A) the Schedule 14D-9,
(B) the Proxy Statement (as
hereinafter defined) if stockholder
approval is required by law, (C) the
information required by Rule 14f-1 under
the Exchange Act and (D) such reports
under Section 13(a) of the Exchange Act as
may be required in connection with
this Agreement and the Transactions, (v)
such filings and approvals as may be
required by any applicable state securities
or blue sky laws, and (vi) where the
failure to obtain such consents, approvals,
authorizations or permits, or
32
<PAGE>
to make such filings or notifications,
individually or in the aggregate, would
not reasonably be expected to prevent or
materially delay consummation of the
Offer or the Merger, or otherwise would not
reasonably be expected to prevent or
materially delay the Company from
performing its obligations under this
Agreement, and would not reasonably be
expected to have a Material Adverse
Effect.
SECTION
4.06 Permits; Compliance.
(a) Except as set forth in Part I of Section 4.06 of the
Disclosure
Schedule, each of the Company and each
Subsidiary is in possession of all
franchises, grants, authorizations,
licenses, permits, easements, variances,
exceptions, consents, certificates,
approvals and orders of any Governmental
Authority necessary for each of the Company
and the Subsidiaries to own, lease
and operate its properties and to carry on
its business as it is now being
conducted (the "Permits"), except where the
failure to have, or the suspension
or cancellation of, any of the Permits,
individually or in the aggregate, would
not reasonably be expected to prevent or
materially delay consummation of the
Offer or the Merger or otherwise would not
reasonably be expected to prevent or
materially delay the Company from
performing its obligations under this
Agreement and would not reasonably be
expected to have a Material Adverse
Effect. As of the date hereof, no
suspension or cancellation of any of the
Permits, is pending or, to the knowledge of
the Company, threatened, except
where the failure to have, or the
suspension or cancellation of, any of the
Permits, individually or in the aggregate,
would not reasonably be expected to
prevent or materially delay consummation of
the Offer or the Merger or otherwise
would not reasonably be expected to prevent
or materially delay the Company from
performing its obligations under this
Agreement and would not reasonably be
expected to have a Material Adverse Effect.
Except as set forth in Part II of
Section 4.06 of the Disclosure
33
<PAGE>
Schedule, neither the Company nor any
Subsidiary is in conflict with, in default
under, or in breach or violation of, (a)
any Law applicable to the Company or
any Subsidiary or by which any property or
asset of the Company or any
Subsidiary is bound or affected, or (b) any
Contract to which the Company or any
Subsidiary is a party or by which the
Company or any Subsidiary or any property
or asset of the Company or any Subsidiary
is bound, except for any such
conflicts, defaults, breaches or violations
that, individually or in the
aggregate, would not reasonably be expected
to prevent or materially delay
consummation of the Offer or the Merger or
otherwise would not reasonably be
expected to prevent or materially delay the
Company from performing its
obligations under this Agreement and would
not reasonably be expected to have a
Material Adverse Effect.
SECTION
4.07 SEC Filings; Financial Statements.
(a) Except as set forth in Section 4.07(a) of the Disclosure
Schedule, the Company has timely filed all
forms, reports and documents
(including exhibits and other information
incorporated therein) required to be
filed by it with the SEC since June 30,
2002 (the forms, reports and other
documents referred to above being,
collectively, the "SEC Reports"). The SEC
Reports (i) were prepared in accordance
with the requirements of the Securities
Act of 1933, as amended (the "Securities
Act") and the rules and regulations
promulgated thereunder or the Exchange Act
and in the rules and regulations
promulgated thereunder, as the case may be,
applicable to such SEC Reports, (ii)
the SEC Reports, as of their respective
dates (and, if amended or superseded by
a filing prior to the date of this
Agreement or the expiration of the Offer,
then on the date of such filing), complied
in all material respects with all
requirements of the Securities Act or the
Exchange Act, as the case may be, and,
in each case, the rules and regulations
promulgated thereunder, applicable to
such SEC Reports and (iii) did not, at the
time
34
<PAGE>
they were filed, or, if amended, as of the
date of such amendment, contain any
untrue statement of a material fact or omit
to state a material fact required to
be stated therein or necessary in order to
make the statements made therein, in
the light of the circumstances under which
they were made, not misleading. No
Subsidiary is required to file any form,
report or other document with the SEC.
The SEC Reports included or, with respect
to such reports filed after the date
hereof, will include all certificates
required to be included therein pursuant
to Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002, as amended (the "SOX
Act"), and the internal control report and
attestation of the Company's outside
auditors required by Section 404 of the SOX
Act.
(b) The Company is in compliance in all material respects with
the
applicable provisions of the SOX Act and
the applicable listing and governance
rules and regulations of the Nasdaq. The
Company has implemented disclosure
controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) to
ensure that material information relating
to the Company is made known to the
management of the Company by others within
those entities. The Company and each
Subsidiary (i) makes and keeps accurate
books and records and (ii) maintains
internal accounting controls which provide
reasonable assurance that (a)
transactions are executed in accordance
with management's general or specific
authorization, (b) transactions are
recorded as necessary to permit preparation
of its financial statements in conformity
with GAAP and to maintain
accountability for its assets, (c) access
to its assets is permitted only in
accordance with management's general or
specific authorization and (d) the
reported accounting for its assets and
liabilities is compared with existing
assets and liabilities at reasonable
intervals. The Company has prepared a plan
to comply with the requirements of Section
404 of the SOX Act on the date by
which it must comply with such
requirements.
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<PAGE>
Except as set forth in Section 4.07(b) of
the Disclosure Schedule, the Company
is not aware of any reason it will not
comply with the requirements of Section
404 of the SOX Act on the applicable
compliance date and has no knowledge of any
"significant deficiency" or "material
weakness" in the Company's internal
controls. For purposes of this Agreement,
the terms "significant deficiency" and
"material weakness" shall have the meanings
assigned to them in the Statements
of Auditing Standards No. 60, as in effect
on the date hereof.
(c) Each of the consolidated financial statements (including,
in
each case, any notes thereto) contained in
the SEC Reports was prepared in
accordance with United States generally
accepted accounting principles ("GAAP")
applied on a consistent basis throughout
the periods indicated (except as may be
indicated in the notes thereto) and each
fairly presents, in all material
respects, the consolidated financial
position, results of operations and cash
flows of the Company and its consolidated
Subsidiaries as at the respective
dates thereof and for the respective
periods indicated therein, except as
otherwise noted therein (subject, in the
case of unaudited statements, to normal
and recurring year-end adjustments which
are not, individually or in the
aggregate, material).
(d) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the
consolidated Subsidiaries as at June 30,
2004, including the notes thereto (the
"2004 Balance Sheet"), neither the
Company nor any Subsidiary has any
liability or obligation of any nature
(whether accrued, absolute, contingent or
otherwise), except for liabilities and
obligations, incurred in the ordinary
course of business consistent with past
practice since June 30, 2004, which,
individually or in the aggregate, would not
reasonably be expected to prevent or
materially delay consummation of the Offer
or the Merger or otherwise would not
reasonably be expected to prevent or
materially delay the Company from
performing
36
<PAGE>
its obligations under this Agreement and
would not reasonably be expected to
have a Material Adverse Effect.
(e) The Company has heretofore furnished to Parent complete and
correct copies of all amendments and
modifications that have not been filed by
the Company with the SEC to all agreements,
documents and other instruments that
previously had been filed by the Company
with the SEC and are currently in
effect.
(f) Set forth on Section 4.07(f) of the Disclosure Schedule is
the
most recently prepared financial outlook
for the Company and Subsidiaries for
fiscal year 2006 (the "Outlook").
Management of the Company prepared the Outlook
in good faith based upon assumptions it
believes are reasonable as of the date
hereof; it is understood that all
projections are subject to significant
uncertainties and that no representation is
being made hereby that the projected
results will be achieved.
(g) There are no uninstalled Units that have been recorded into
income by the Company or any Subsidiary.
For purposes of the immediately
preceding sentence, "Units" has the meaning
assigned to such term under the
Purchasing Agreement by and between Parata
Systems, LLC and Spirit effective as
of July 21, 2003, as amended by the
Addendum to the Purchasing Agreement dated
April 30, 2004.
SECTION
4.08 Absence of Certain Changes or Events.Since June 30, 2004,
except as set forth in Section 4.08 of the
Disclosure Schedule or in the SEC
Reports, or as expressly contemplated by
this Agreement, (a) the Company and the
Subsidiaries have conducted their
businesses only in the ordinary course and in
a manner consistent with past practice, (b)
there has not been any Material
Adverse Effect or the occurrence of any
event, circumstance or change that would
reasonably be expected to have a Material
Adverse Effect, and (c) neither the
37
<PAGE>
Company nor any Subsidiary has taken any
action that, if taken after the date of
this Agreement, would constitute a breach
of any of the covenants set forth in
Section 6.01.
SECTION
4.09 Absence of Litigation.Except as set forth in Section
4.09(a)
of the Disclosure Schedule, there is no
litigation, suit, claim, action,
proceeding or investigation (an "Action")
pending or, to the knowledge of the
Company, threatened against the Company or
any Subsidiary, or any property or
asset of the Company or any Subsidiary,
before any Governmental Authority that
(a) individually or in the aggregate, would
reasonably be expected to have a
Material Adverse Effect or (b) seeks to or
would, individually or in the
aggregate, reasonably be expected to
materially delay or prevent the
consummation of any Transaction. None of
the Company, any Subsidiary or any
property or asset of the Company or any
Subsidiary is subject to any continuing
order of, consent decree, settlement
agreement or similar written agreement
with, or, to the knowledge of the Company,
continuing investigation by, any
Governmental Authority, or any order, writ,
judgment, injunction, decree,
determination or award of any Governmental
Authority that, individually or in
the aggregate, would reasonably be expected
to prevent or materially delay
consummation of the Offer or the Merger or
otherwise would reasonably be
expected to prevent or materially delay the
Company from performing its
obligations under this Agreement or would
reasonably be expected to have a
Material Adverse Effect. Except as
disclosed in Section 4.09(b) of the
Disclosure Schedule, none of the Company or
any Subsidiary or, to the knowledge
of the Company, any of their respective
officers, directors or employees, or any
vendor or customer of the Company or any
Subsidiary, is the subject of, has been
named in or has received any notice of any
investigation by any Governmental
Authority relating to the diversion of any
Drugs, or to alleged involvement in
unauthorized or
38
<PAGE>
unlawful Drug resale, or the distribution
or sale of adulterated, misbranded,
subpotent, or expired Drugs.
SECTION
4.10 Employee Benefit Plans.
(a) Section
4.10(a) of the Disclosure Schedule lists (i) all
employee benefit plans (as defined in
Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA")) and all bonus, profit
sharing, savings, retirement, stock option,
stock purchase, restricted stock,
incentive, deferred compensation, fringe
benefit, perquisite, retiree medical or
life insurance, supplemental retirement,
severance or other benefit plans,
programs, policies, agreements or
arrangements, and all employment, consulting,
change in control, termination, severance,
retention or other Contracts or
agreements (which, in the case of any
employment agreement or Contract, is
material), whether legally enforceable or
not, to which the Company, any
Subsidiary or any ERISA Affiliate is a
party, with respect to which the Company,
any Subsidiary or any ERISA Affiliate has
any obligation or which are
maintained, contributed to or sponsored by
the Company, any Subsidiary or any
ERISA Affiliate for the benefit of any
current or former employee, officer,
consultant or director of the Company, any
Subsidiary and (ii) any material
arrangements, understandings or Contracts
between the Company, any Subsidiary or
any ERISA Affiliate and any current or
former employee, officer, consultant or
director of the Company or any Subsidiary
including, without limitation,
